By Rhee So-eui and Marie-France Han
SEOUL (Reuters) - Samsung Electronics' <005930.KS> stronger-than-expected quarterly earnings forecast failed to wow investors, who are worried a fast recovering won and competition are already starting to cut into profits.
Analysts were looking ahead to the South Korean company's fourth-quarter results, which could signal a slowdown linked to increased spending and heightened competition from the likes of Japan's Sony <6758.T> and home rival LG Electronics <066570.KS>.
Samsung, the world's top maker of memory chips and flat screen TVs, made a spectacular turnaround this year, riding a sector recovery and wrestling market share from global rivals, sending its stock to a record high last month.
But analysts said the best might be over.
"Samsung seems to have reached a peak," said Shinhan Investment analyst Sung Hye-jin. "Earnings will likely fall in the fourth quarter as LCD prices have turned lower, the handset division will spend more on marketing as usual, and its rivals have quickly caught up in the LED TV sector."
Samsung shares have fallen 9 percent from a record struck on Sept 22 versus a 6 percent fall in the broader market <.KS11>. The stock is up 67 percent so far this year, beating a 42 percent rise in the market.
On Tuesday, Samsung forecast third-quarter consolidated earnings to come at median 4.1 trillion won ($3.5 billion), higher than market estimates and up sharply from 2.42 trillion won in the second quarter. If earnings come in as indicated, Samsung could post one of its strongest quarters in July-September.
The recovery is likely to be most evident in its flagship memory chip business, which is expected to post a parent-basis operating profit margin of about 16 percent, up from 3 percent in the second quarter and an abysmal 17 percent loss margin in the hard-hit-first quarter.
Robust sales of flat screen TVs have been another key driver for Samsung, the world's biggest maker of liquid crystal display (LCD) panels and TV sets.
Shortage of raw materials kept LCD prices high while Samsung established itself as a leader in the premium LCD TV segment which uses light emitting diode (LED).
In mobile phones, where Samsung competes with Finland's Nokia
The company releases third quarter results on October 30.
"Numbers were great but shares are weighed by growing concerns over the fourth quarter," said Choi Jong-hyeok, a fund manager at Midas Asset Management.
"Analysts are lowering expectations for fourth-quarter earnings due to the recent recovery in the won."
Beyond the fourth quarter, traditionally a weak period for the technology sector, the South Korean powerhouse is set to post solid earnings well into 2010, analysts said.
"Earnings will slightly weaken in the fourth quarter, but it's likely that the momentum will continue in the next few quarters," said Jay Kim, an analyst at Hyundai Securities.
"The outlook depends on the foreign exchange rate and how aggressively Samsung spends on marketing for mobile phones and TVs."
In Tuesday's filing, Samsung said consolidated operating profit would come in a range between 3.9 trillion won and 4.3 trillion won, a median of 4.1 trillion won, while consolidated sales would come in between 35 and 37 trillion won, or a median of 36 trillion won.
Samsung's operating profit median was higher than a consensus forecast of 3.8 trillion won from 10 analysts polled by Thomson Reuters I/B/E/S.
On a parent basis, which excludes Samsung's numerous foreign subsidiaries, Thomson Reuters I/B/E/S forecasts Samsung to post an operating profit of 2.35 trillion won and sales of 23 trillion won for the third quarter.
($1=1165.2 Won)
(Additional reporting by Seo Eun-kyung; Editing by Anshuman Daga)
